UnitedHealth Group, the largest health-care conglomerate in the United States, faces a civil fraud investigation by the Department of Justice (DOJ) into its billing practices for Medicare Advantage plans. The investigation examines whether the company made questionable diagnoses to secure extra payments from Medicare. This news has impacted the company's stock price, which fell by 9% following the announcement.
The DOJ's investigation focuses on whether UnitedHealth routinely made diagnoses that would trigger additional payments in its Medicare Advantage plans. Allegations suggest that these questionable practices may have resulted in Medicare paying UnitedHealth billions of dollars. Despite these accusations, UnitedHealth has denied any wrongdoing, stating that the company operates according to the highest levels of government compliance.
"Any suggestion that our practices are fraudulent is outrageous and false," UnitedHealth stated in response to the allegations.
The company maintains that it has been transparent about its billing practices and insists it has not engaged in fraudulent activity. However, the investigation adds to an already challenging period for UnitedHealth, which is also dealing with a probe into potential antitrust violations by its subsidiary Optum Rx. Additionally, the company is still addressing the repercussions of a cyberattack on another subsidiary, Change Healthcare, which compromised protected health information for approximately 190 million individuals. UnitedHealth has paid out more than $3 billion to providers affected by this breach.
UnitedHealth's troubles have drawn criticism from notable figures such as billionaire investor Bill Ackman. He has called for the Securities and Exchange Commission (SEC) to investigate the company, alleging that UnitedHealth's profitability is overstated due to its denial of medically necessary procedures.
"Profitability is massively overstated due to its denial of medically necessary procedures," remarked Bill Ackman.
In response to these challenges, UnitedHealth is offering buyouts to employees and may consider layoffs if resignation quotas are not met. The company's market cap remains significant, standing at over $420 billion, but recent developments have certainly affected its financial stability and public image.
Despite the ongoing scrutiny and financial setbacks, analysts like Ben Hendrix from RBC Capital Markets believe that these issues are unlikely to cause major operational disruptions for UnitedHealth in the near term.
"Lengthy process and unlikely in our view to result in material financial headwinds in the near term," said Ben Hendrix regarding the DOJ's investigation.
UnitedHealth continues to emphasize its commitment to compliance and transparency. The company asserts that it consistently performs well in government compliance reviews. Nevertheless, the combination of legal challenges and public criticism poses a formidable test for UnitedHealth as it navigates through these turbulent times.